Contactless helps debit cards dominate UK spending

The rise of contactless payments helped debit cards strengthen their dominance over UK retail spending last year, according to trade association figures.

The UK Cards Association says that Brits used debit cards to make 7.7 billion purchases, worth £337 billion last year, accounting for half of the value of all retail sales.

With 47 million cardholders throughout the UK, that means that the average number of transactions for the 12 months passed the 200 mark for the first time, reflecting an increased willingness to pay for small value purchases with plastic, suggests the report.

This is partly because there are now 32 million contactless cards in circulation in the UK and their use is increasingly rapidly. At the end of 2012 they were used to make 70 transactions per minute but this had risen to 120 a minute by March and is predicted to hit 300 per minute at the end of 2013.

In contrast, 30 million credit and charge cardholders made just 2.2 billion purchases, worth £140 billion, between them, averaging 68 transactions a year.

For the first time, 2012 also saw debit overtake credit for online spending - £35 billion, compared to £34 billion. Total online card spending increased by £5 billion to £68 billion - 15% of all personal card spending.

The association predicts that cards will see their dominance over the likes of cash and cheques grow over the next decade, with the value of transactions nearly doubling to £840 million.

This will be driven by the young, who have grown up with cards, the continued rise of contactless payments, and technological innovation that allows payments to be made using mobile phones rather than cards.

However, although the report predicts that mobile payments and commerce will help drive debit card spending, the new channel also poses a risk. The recently announced Barclays' Buyit and Vocalink's Zapp mobile services both bypass the card schemes, instead making use of Faster Payments, providing a hint of a potential cardless future.